More Than a Dead-Cat Bounce? We'll Find Out Today

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Our View

I could ask Sidd or Trader Dave what happened yesterday — two Mr. Top Step traders from the chat — but I know it well enough to explain it in my own terms. Everyone was short and there was a big (0DTE) options expiration today where millions of options were bought and sold.

A few months ago there was an article in the Wall Street Journal about Goldman Sachs complaining about the zero days to expiration (0DTE) options and the late-day volatility it causes.

Some of you know about the 0DTE and some don't. If you don't know, it's a trading necessity that you learn about it and yesterday was just one of the examples. Even if you’re not going to trade them, it’s worth knowing about them. Here is a link to Investopedia's Zero Days to Expiration (0DTE) Options and How They Work.

Am I surprised at how much the ES rallied? Not really because it's all programs, and when you have millions of options to roll or futures to buy while people are off-base and big open interest at ES 4300, it was like someone lit the wick. Plus, in Our Lean I said I was looking for an oversold bounce yesterday, even if the selloff isn’t over.

Remember, these are not our father's markets or charts, and nor will they ever be.